PATENT Jobs Act Seeks to Exempt USPTO from Sequestration

Earlier today Congressman Mike Honda (D-San Jose), Congresswoman Zoe Lofgren (D-San Jose) and Congresswoman Anna G. Eshoo (D-Palo Alto) introduced the Patents And Trademarks Encourage New Technology (PATENT) Jobs Act to exempt the United States Patent and Trademark Office (USPTO) from the what they sponsors called debilitating cuts imposed by budget sequestration. Indeed, those who have followed this issue know that during the debate and ultimate passage of the America Invents Act (AIA) much was made of the ability of the USPTO to keep its fees and use them to support ongoing business operations. Written promises were made, no binding promises were enacted as part of the legislation, and few could have anticipated that so soon after the USPTO would once again be facing a budget shortfall. See Lack of Commitment to PTO Funding.

Even though the USPTO is funded solely by patent user fees, the sequester requires cuts of nearly $150 million in the agency’s funding. Without a legislative remedy, the shortfall effectively stops the agency from opening new, highly anticipated regional patent offices across the country, including one located in Silicon Valley. See USPTO Announces Satellite Office Locations. Not surprisingly, each of the sponsors of the bill represent districts in Northern California in the greater San Jose area, which explains their keen interest in the opening of the Silicon Valley satellite Patent Office location. Honda represents the 17th District, Lofgren represents the 19th District and Eshoo represents the 18th District.

The PATENT Jobs Act would enable USPTO to access the fee revenue sequestered in Fiscal Year 2013, which would otherwise sit unused and untouchable, and would add the USPTO to the list of agencies exempt from sequestration orders. This is not a new budgetary concept. Congress has recognized the uniqueness of user-fee-funded agencies in the past, exempting them from sequestration in the Statutory Pay-As-You-Go Act of 2010. The legislation follows a bipartisan letter sent earlier this week by members of the California delegation to the Commerce, Justice, and Science Appropriations Subcommittee asking for a remedy.

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Support for the PATENT Jobs Act

A number of trade and industry groups and bar associations have joined in calling upon the Office of Management and Budget (OMB) and Congress to address the application of sequestration to USPTO and are supportive of efforts to exempt USPTO from sequestration:

• Endorsed by the American Intellectual Property Law Association, the American Bar Association, Coalition for 21st Century Patent Reform, and the Intellectual Property Owners Association;
• The Silicon Valley Leadership Group are calling on OMB and Congress to address the problem; and
• A coalition of AdvaMed, California Healthcare Institute, CONNECT, the Innovation Alliance, IFPTE, MDMA, NTEU, NVCA, POPA, and WARF.

These groups have called on Congress to “rectify this unacceptable diversion of fees by restoring to the USPTO all of the fees being paid in 2013 and ensure that future across-the-board cuts will not impact fees paid to the USPTO.”

The USPTO Backlog

According to the USPTO’s Patent Dashboard, as of May 2013 there are 596,159 unexamined patent applications in the backlog. These are the applications that have yet to be substantively treated even for the first time by a Patent Examiner. One of the justifications for the establishment of the new offices was to speed the process for start-ups and innovators. While the press release issued by the bill sponsors called the wait “a costly two-year wait for a patent to be issued,” in reality it frequently takes at least 3 to 4 years, sometimes quite a bit longer for truly unique inventions.

Although much progress has been made to speed up administration of applications at the USPTO during the Obama Administrations, sometimes as long as 6, 8 or 10 years if the innovation deals with software or computer systems or high tech communications systems. If an appeal is necessary the average balloons to some 87.2 months. This is particularly disturbing because if the applicant is willing to wait that long and pay to appeal the underlying invention has to be one deemed commercially valuable. It just doesn’t make any sense to appeal when there is a limited market opportunity.

What the Representatives Said about the Bill

“USPTO is funded entirely by fees paid to the agency, making it fundamentally different than other government spending,” said Rep. Honda. “Congress intended for these fees to be used solely to carry out USPTO’s operations, not the government at large. Our bill will prevent the application of sequestration to USPTO fee revenue so that the Silicon Valley office can open as scheduled and USPTO can continue the progress that has been made on reducing the patent application backlog, which is vital for ensuring America’s economic competitiveness.”

“It is very short-sighted to hold back the new products and cutting edge technologies that can grow our economy,” said Rep. Lofgren. “Our bill is very simple and reaffirms a long held belief that inventors who pay fees should receive speedy services and patents for their inventions. The services and speed these new offices offer can make the difference for products to go from the drawing board to the marketplace faster, benefiting all of us with the growth and job creation that come with it.”

“The U.S. Patent Office has been crucial to economic growth and innovation in America. Sequestering this self-funded agency is illogical and sets it up to fail,” Rep. Eshoo said. “These cuts will exacerbate the patent backlog and stifle efforts to connect Silicon Valley innovators with a satellite patent office. Our legislation will enable USPTO to implement reforms and programs years in the making so that the agency can continue to foster the wealth of knowledge and innovation across America.”